On May 8, as the S&P 500 hit a new all-time high, Michael Burry posted on his paid Substack, comparing the tech stock surge to "minutes before a bloody car crash." He warned the Nasdaq 100's price-to-earnings ratio stood at 43x, far above his estimated fair value of 30x, while the Philadelphia Semiconductor Index surged nearly 70% in three months — a pattern eerily similar to the dot-com bubble peak.
PE at 43x, Earnings Overestimated by 50%
Burry calculated that Wall Street has overestimated earnings of the fastest-growing, highest-valuation companies by 50%. Earnings expectations for AI stocks have detached from reality, and a repricing could be violent when quarterly reports disappoint. The Shiller CAPE hit 40.1 on May 8, approaching levels seen only during the 2000 mania.
Chip Stocks at Epicenter: SOX Up 70% in 3 Months
Burry singled out the Philadelphia Semiconductor Index (SOX), which surged roughly 67.95% from its late-March low to May 8, with a one-year gain of 164.97%. Led by Nvidia and TSMC, the vertical rally mirrors the parabolic chart of the Nasdaq in late 1999, a red flag Burry calls unmistakable.
Burry's Bets: SOXX Puts and $1B Palantir Short
Burry put money behind his words: he bought iShares Semiconductor ETF (SOXX) January 2027 puts, betting on a 30% decline from current levels. He also holds nearly $1 billion notional short on Palantir via $100 strike puts expiring December 2026 and $50 puts expiring June 2027. His "Anthropic Displacement" thesis argues Claude is displacing Palantir in enterprise markets, a key catalyst.
Yet He Advises: Don't Short Stocks
Paradoxically, Burry warns against outright shorting. Puts are expensive, and timing a bubble peak is nearly impossible; early entry leads to severe losses from short squeezes. He uses long-dated puts to allow time for his thesis to play out, but acknowledges option decay will eat at his positions before the bubble bursts.
What Does This Mean for Crypto?
Bitcoin's 30-day rolling correlation with the Nasdaq 100 has frequently exceeded 0.7, aligning risk appetite. If AI stocks crash, institutional investors will slash crypto exposure amid risk-off flows. Conversely, a sharp Nasdaq decline could force the Fed to ease or emergency cut, historically making crypto one of the fastest rebounders. Burry's warning is a reminder: crypto cannot decouple from equity bubble risks when AI narratives and on-chain valuations remain tightly intertwined.